Question

Justify the following statement:
The bank accept two types of deposits from the public i.e. demand and time deposit?

Answer 1

 1) Demand Deposits.
The deposits which are repayable on demand is called ‘demand deposits’. The demand deposits include saving deposits and current deposits. A saving deposits account aims at promoting the habit of saving among the fixed income earners. Interest at certain rates is paid on the minimum balance in this account. There are restrictions on the number of withdrawals. Pass book is issued to the depositor. E-statement issued to depositor only on demand.
(2) A current deposit account is meant for businessmen and institutions. There are no restrictions on the number and Amount of withdrawals from this account. Interest is not payable on the balance standing in this account. Overdraft facility is granted only to current account holders after following the prescribed procedure of the bank.
(2) Time Deposits.
Any deposit which is not repayable on demand is called time deposit. Time deposits are repayable after specified period of time. Time deposits may be classified as fixed deposit and recurring deposit. Under Fixed deposit account certain amount is deposited for fixed period (minimum 45 days or more). Usually higher rate of interest is paid depending on the period. Interest is paid either at regular time interval or on maturity of deposits. Fixed Deposit Receipt (FDR) is issued to the depositor. Loan is given to depositor on the security of FDR.
(2) Under Recurring deposit account, depositor is required to deposit with the bank a fixed sum of money every month for 12, 24, or 60 months. To encourage saving habit among the people bank allows depositors to open this account. On maturity, depositor gets the total amount deposited plus interest accrued on it. Passbook is issued to the depositor. E-statement is issued to the depositor only on demand.